Today Rusty & Robyn are joined by Kevin Carter, Founder and Chief Investment Officer of EMQQ Global. Kevin T. Carter is the Founder & Chief Investment Officer of EMQQ Global, including EMQQ, FMQQ, and INQQ. While he considers himself an active “value” investor first and foremost, he has collaborated with Princeton economist and indexing legend, Dr. Burton Malkiel, for more than 20 years. Their work together began in 1999 with the development of eInvesting, a pioneer firm in fractional share brokerage that was acquired by ETRADE in 2000. In 2002 they founded Active Index Advisors, a pioneer in so-called “direct indexing” that was acquired by Natixis Asset Management in 2005. In 2006, their efforts turned to China and Emerging Markets with Dr. Malkiel’s publishing of “Investment Strategies to Exploit Economic Growth in China” and the subsequent book From Wall Street to the Great Wall. Working with Guggenheim Partners, they launched several China focused ETFs on the NYSE. Kevin launched EMQQ in 2014 after noticing how the smartphone was changing his personal consumption habits. He now lives in Lafayette, California with his wife and three children.

Key Takeaways

[02:57] - Kevin’s professional background and how he came to specialize in Emerging Markets.
[06:30] - What is the EMQQ Global investment philosophy?
[10:35] - What are some of the biggest obstacles to EM investing and what might be some potential catalysts for EM to have sustained outperformance?
[12:52] - Many investors think that China is not investable, so they avoid EM altogether. What is Kevin’s take on China?
[16:55] - Why does Kevin think that “India is the perfect Emerging Market?”
[20:36] - What is the “India Stack” and why does Kevin describe it as a cheat code?
[32:02] - How does India’s government work and what about this makes it a compelling place to invest?
[35:37] - How should investors think about sizing a position in Emerging Markets?
[38:21] - What was it like working with Burton Malkiel?
[40:21] - What is Kevin’s favorite investment idea?
[42:52] - Who are some of the mentors and colleagues that Kevin is particularly grateful for?

Quotes

[10:35] - “I think the biggest problem [in EM investing]...is the index itself. I mean the MSCI Emerging Markets Index, which is the index that all these institutions use…[is fundamentally flawed because of]...the state owned enterprise. When I got involved with China, the China ETF was more than 80% in Chinese, Communist Party owned banks and oil companies and not only are these inefficient companies, they are not trying to grow their profits.” ~ Kevin Carter

[13:32] - “There were two different strains of fear that people couldn’t get over, both of which were boogeymen, but they were so rampant in the headlines that it resulted in people saying ‘that China is uninvestable.’ Those two things were the so-called ‘delisting threat,’ where the Chinese companies trading in the US were going to be delisted and people thought that meant they were going to lose all their money…The other thing was the so-called ‘tech crackdown’…The problem is, China has such a bad reputational issue…that people think all of these things are true and they ran for the hills.” ~ Kevin Carter

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Disclosure(s) - Orion Portfolio Solutions, LLC, an Orion Company, is a registered investment advisor.

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